Health Insurance Exchanges: CalChoice May Serve As a Model for Other States

August 16, 2010

CalChoice: A Potential Model for Health Reform

A key component of the Patient Protection and Affordable Care Act, which was signed into law in March 2010, is the idea of the health insurance exchange. However, health insurance exchanges are not a novel idea. Some states, such as California, Massachusetts, Florida, and others have been running health insurance exchanges for some time. In fact, California's CalChoice could serve as a good model for federal health insurance exchange programs.

What kind of health insurance exchange can be expected with reform?

A health insurance exchange could be a detailed listing of all the insurance plans available in an area or a more regulated marketplace, where the exchange selects the insurers allowed to sell policies and sets the minimum benefits those insurers must provide.

The new health reform law creates the latter--a marketplace that allows individuals and small businesses to purchase affordable health insurance and guarantees that a minimal level of essential benefits are covered by the insurance plans offered in the exchange.

Who is required to participate in an exchange and when would they begin?

Technically, no business or individual is required to purchase affordable health insurance through the exchange. However, many may participate in the exchange because of the individual mandate requirement. The exchange should offer affordable, high-quality health insurance options for individuals and families who do not get adequate insurance at work and cannot afford to buy private insurance.

Health insurance exchanges are also for small businesses that cannot afford small group health insurance. According to Whithouse.gov, the health insurance exchange, "Is one-stop shopping that will enable you and your family to find a plan that is right for you."

Additionally, if you lose your job, move or decide to leave your current employer, you will be given the option to purchase affordable health insurance through the exchange. The health insurance reform law requires that every state have a health insurance exchange by 2014.

What is CalChoice?

In 1996, CaliforniaChoice began a new program for small California companies, allowing employees to choose between five plans that would meet their individual health care needs. Additionally, CalChoice includes five additional plans to choose from:

Dental

Vision

Chiropractor/acupuncture

Life insurance.

For employers, CalChoice enables small business owners to continue subsidizing benefits in the face of rising healthcare premiums. As of May 2010, CalChoice has more than 10,000 small businesses participating.

How is CalChoice different from the federal insurance exchange program?

CalChoice is arguably the most successful and largest health insurance exchange for small businesses in the country, with high levels of customer satisfaction. For these reasons, the federal insurance programs can look to emulate many of CalChoice's attributes. However, CalChoice differs from the federal program in three ways:

CalChoice is only for small businesses while the federal program would be for small businesses and individuals and families.

The California health insurance exchange is operated by a private company, while the federal program requires each state to operate the exchange (at this time, it is unclear if private exchanges will be allowed)

Most importantly, CalChoice does not guarantee a minimal level of benefits offered by the plans participating in the exchange. With the federal program, participating plans must offer a minimal level of basic benefits.